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Fri, Dec 10, 2004 - Page 12 News List

European luxury brands chase China's rising wealth

NOVEAU RICHE China, together with India and Russia, is part of what is seen as a ''golden triangle'' of the newly wealthy who are `thirsty' for luxury goods

THE GUARDIAN , LONDON

French interior designer Bruno Moinard is waxing lyrically about his latest work, Cartier's new Shanghai shop, praising it as the prestigious French jeweller's "most beautiful outlet in the world."

But Moinard is by no means the only member of the European luxury goods industry to enthuse about China.

Together with India and Russia, the world's most populous nation has become part of the so-called "golden triangle," attracting Europe's biggest designer labels.

The move eastwards marks a turning point for Western luxury-good businesses whose sales have traditionally been concentrated on Europe, the US and Japan.

"These emerging countries are very important," said Vera Strubi, chairman of Thierry Mugler perfumes. "You have to be there now."

Jacques Carles, a consultant to the French luxury goods industry, agrees.

"There is an incredible thirst for luxury in the countries that are emerging from communism," he said.

Cadillac, for instance, says China is its fastest-growing market, as does LVMH, the French group that includes Louis Vuitton bags, Moet champagne and the Givenchy label among its businesses.

A spokesperson for LVMH says China already accounts for 10 percent of its worldwide sales and would soon be its biggest market, with Chinese consumers queuing up to pay US$500 or more for a Louis Vuitton holdall or designer dress.

Although hundreds of millions of Chinese peasants live in poverty, analysts say 3 percent of the population is rich enough to be potential customers for LVMH and its competitors. That's 50 million people -- 236,000 of whom are dollar millionaires -- according to Jerome Lescure, an analyst at the consultants AT Kearney.

"There are also about 61,000 dollar millionaires in India and 84,000 in Russia," he says.

Antoine Colonna, an analyst at Merrill Lynch, says: "In these countries, what you have to look at is not the average income but the purchasing power of the target group."

Jean-Paul Gaultier, Nina Ricci, Sonia Rykiel, Paco Rabanne, and Karl Lagerfeld are among the designers who are trying to tap this market, all of whom have opened boutiques in Shanghai.

But if China is the foremost destination for the west's fashion leaders, India is not far behind. Sales of Prada, Fendi, Versace and other luxury products are rising by 20 percent per annum just as Porsche has recently opened its first Indian showroom.

"Our customers want the latest models and particularly limited editions," said Prasanna Bhaskar, head of Louis Vuitton India. "The Chinese want what others already have. Here, customers look for something exclusive."

Western firms are particularly pleased with the way men have responded in the "golden triangle" countries.

"In the West, until the 1980s, it was women who bought luxury goods," said Benjamin Comar, a former marketing director for Cartier.

"In developing countries, it is men as well as women. Men are making the money in these countries and they want to spend it on themselves," Comar said.

However, trading in China, India and Russia is not without risk.

Jacques Carles is among a wide range of experts who believe French and Italian fashion houses will pay dearly for their arrogant assumption that they have a natural monopoly on good taste.

He says China and India will produce their own designers and their own labels within 20 years, providing competition for the European groups.

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